Inventory Accumulation vs. Limited Circulating Goods: Lead Price Rally May Slow Down [SMM Lead Morning Comment]

Overnight, LME lead opened at $2,022.5/mt. During the Asian session, buoyed by the rise in SHFE lead, LME lead fluctuated between $2,027-2,037/mt. Entering the European session, the US dollar index continued to rise, hitting a nearly one-year high, putting pressure on base metals. LME lead also dropped, hitting a low of $2,003/mt, the lowest in nearly half a month, and finally closed at $2,010/mt, down 0.69%.

Overnight, the most-traded SHFE lead 2412 contract opened at 17,140 yuan/mt. With the accumulation of lead warehouse warrant inventory, SHFE lead plunged at the beginning of the session, falling to 17,055 yuan/mt. In the spot market, the limited circulating goods contrasted sharply with the high inventory in the delivery warehouse, leading to a stalemate between long and short positions. In the latter part of the trading session, SHFE lead consolidated between 17,070-17,100 yuan/mt. It finally closed at 17,115 yuan/mt, down 0.35%; open interest was 43,123 lots, a decrease of 1,279 lots from the previous trading day.

Macro side, three Chinese departments issued new tax incentives for the real estate market: the area standard for enjoying the current 1% low tax rate was raised from 90 m² to 140 m²; the lower limit of the land value-added tax pre-collection rate in various regions was uniformly reduced by 0.5 percentage points. US October CPI accelerated YoY to a three-month high but met expectations. Wall Street commentary: next month's interest rate cut is almost certain, but next year's rate cut pace may slow due to Trump's policies. US Fed officials said inflation is moving in the right direction.

Fundamentally, with the SHFE lead 2411 contract delivery approaching, SHFE lead warehouse warrant inventory is increasing daily, and the increase in visible inventory is limiting the upside potential of lead prices. Meanwhile, after a significant rise in lead prices, downstream enterprises are mostly adopting a wait-and-see attitude, which is not conducive to lead ingot destocking. However, in the short term, the circulating goods in the lead spot market are still limited. Attention should continue to be paid to the resumption of production by secondary lead enterprises and the changes in the premiums and discounts of secondary refined lead.